Global truths

Donald J. Johnston

Secretary-General of the OECD

There are large economic forces at work in the world that carry the potential for immense human progress, but that also can make our economies and societies more vulnerable. Despite the fact that we have known this for at least two decades, since the process of globalisation began to take hold, the international community still fails to secure cooperative action on a scale and nature that will allow all nations to reap the benefits of globalisation.

I am convinced that this period of history will be characterised as the “age of globalisation”. Let us make sure historians have a good story to tell, of how world leaders seized the moment to harness untold opportunities to eradicate the poverty, misery and disease in many parts of the developing world; and of how economic growth was firmly established worldwide through the transfer and effective application of capital, technology and know-how, combined with unfettered access to global markets for all. What a wonderful story it could and should be!

Some argue that unequal access to global economic opportunities comes down to a lack of political will. I agree. At the same time, we should be aware that since the end of the Cold War there has been unprecedented political effort and organisation devoted to the cause of international economic co-operation. But while the big picture has developed well, vested interests, especially in the OECD area, have slowed down access to the global economy for the countries and sectors that need it most.

Admittedly, these are often complex issues. Globalisation presents us with new challenges which governments must grasp and make understandable to their sometimes worried or confused citizens. Today, for example, the public in some OECD countries is worried that the outsourcing of business services will undermine employment. The analyses of this phenomenon I have seen demonstrate the benefits of outsourcing to both the OECD countries and to the developing world, and should put such fears to rest – provided a clear message gets out.

The efficient operation of global markets and the international economic system is vital to all countries. The health of that system is itself dependent upon effective national policies – both domestic and external – at a time when situations can vary considerably from country to country. A major challenge is to re-establish the facts, with the help of solid data, and dispel misconceptions about globalisation.

Chief among these is the notion that globalisation places draconian limitations on national policies. This statement bears close examination. My own view is that wrong-headed policies that lead businesses and individuals to use their resources or time in wasteful, unproductive ways will bring economic decline and less prosperity, whether or not the national economy is engaged in the global economic system. We have many historical examples of countries that tried autarky and failed.

In contrast, while it is true that the global economy will sanction bad policies, it also provides great economic opportunities, as well as the information needed to harness those opportunities, to countries willing to participate. Globalisation brings benefits, but effective national policies are essential for success. It is certainly not because of globalisation that some economies have experienced a rather disappointing decade. The reason is mostly inertia in the domestic policy reform that must be undertaken to achieve economic and social progress – and to create the confidence the public needs to meet the challenge of globalisation and profit from it.

Related to this is the myth that trade liberalisation damages, rather than furthers, a country’s development. The fallacy of protection has been proven time and again, in rich and poor countries alike. As Jagdish Bhagwati once wrote in the OECD Observer, “protectionism in poor countries is quite often the chief culprit in their dismal export and economic performance.” Of course, not all developing countries have in place the domestic institutional and economic infrastructure to make a success of rapid market opening. But unless they begin to reduce their tariff barriers and open their services markets in line with their capacities, they will not obtain the positive impulses from competition and lower costs that will help their own industries to grow.

In other words, globalisation should be embraced by all countries, not for the sake of any overarching philosophy, but in their own enlightened self-interest.

Of course, it is more difficult for developing countries to sustain the will to liberalise when they see protectionism entrenched in some of the richest OECD countries. Need I mention the agricultural sector, where political will has been woefully weak, despite the clear benefits of open markets to farming! The lessons about preparing domestic policies and opening markets must be understood and acted on by developed OECD countries. Otherwise, our common aspirations to make globalisation work for all, and so provide future historians – our children – with the positive story they deserve, may not be fulfilled.

Twitter feed

Suscribe now

Don't miss

When someone asks me to describe an ideal girl, in my head, she is a person who is physically and mentally independent, brave to speak her mind, treated with respect just like she treats others, and inspiring to herself and others. But I know that the reality is still so much different. By Alda, 18, on International Day of the Girl. Read more.

Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.

Read some of the insightful remarks made at OECD Forum 2017, held on 6-7 June. OECD Forum kick-started events with a focus on inclusive growth, digitalisation, and trust, under the overall theme of Bridging Divides.

Checking out the job situation with the OECD scoreboard of labour market performances:
do you want to know how your country compares with neighbours and competitors on income levels or employment?

Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.

How do the largest community of British expats living in Spain feel about Brexit? Britons living in Orihuela Costa, Alicante give their views.

Brexit is taking up Europe's energy and focus, according to OECD Secretary-General Angel Gurría. Watch video.

OECD Chief Economist Catherine Mann and former Bank of England Governor Mervyn King discuss the economic merits of a US border adjustment tax and the outlook for US economic growth.

Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic
boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.

OECD Observer i-Sheet Series:
OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.

How sustainable is the ocean as a source of economic development?The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.

The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.

They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa. blogs.worldbank.org

Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .